Foreign Aid - The origins of foreign aid



Prior to World War II, U.S. government-to-government assistance and loans were extremely rare and limited to emergency situations. The impulse to spend money to spread goodwill and influence abroad was not absent, of course: in the nineteenth century, private individuals supported such causes as Greek independence in the 1820s and victims of the Irish famine in the 1840s; later, major corporations set up international philanthropic arms like the Rockefeller Foundation. During and after World War I, the U.S. government became directly involved in disaster relief, assisting German-occupied Belgium and sending $20 million to Russian famine victims in 1921. Subsequently, enormous U.S. lending helped rebuild Germany and other countries, alongside the efforts of American religious organizations like the American Friends Service Committee and the Young Men's Christian Association. The U.S. loans stopped, however, in the Great Depression and were never repaid. Campaigning in 1932, Franklin D. Roosevelt promised that the United States would sanction no more such foreign investments.

But military aid continued to flow throughout the interwar years to pro-U.S. regimes in neighboring countries, including Cuba, Mexico, and Nicaragua. During World War II, moreover, the State Department's Coordinator for Inter-American Affairs, Nelson Rockefeller, set up the Institute of Inter-American Affairs, which furnished food and sanitation assistance as a counterweight to Nazi influence in Latin America. In the late 1930s, President Roosevelt developed a Western Hemisphere Defense Program to further U.S. influence in the region with greater trade and cultural ties, as well as military aid. Like the subsequent $50 billion lend-lease program for Europe and Asia, which included the first major U.S. effort to export arms outside Latin America, these initiatives were all defense measures. They were supplemented by other programs, such as the $6.1 billion that the United States contributed to the Government and Relief in Occupied Areas program from 1943 to 1951, as well as the $2.6 billion it furnished the United Nations Relief and Rehabilitation Administration from 1943 to 1947. In the immediate aftermath of the war, the United States also sent military surplus items to France, Britain, Nationalist China, and the Philippines, where it maintained bases following independence in 1946. Such assistance remained ad hoc, since Congress as yet resisted an expansion of U.S. military aid. "We should not be sending military missions all over the world to teach people how to fight in American ways," said the Republican senator Robert Taft of Ohio.

Also during World War II, the Bretton Woods Conference led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (the World Bank), two key instruments of economic relief and reconstruction that were aimed at ending the kinds of economic nationalism that many felt had led to the Great Depression and the war. The IMF established the dollar as the international currency, facilitated international trade, and made loans to governments to fix trade imbalances; the World Bank ensured that foreign investment in developing areas would be less risky by extending loans for reconstruction and development projects, and promoting investment and international trade. The United States dominated both organizations, in 1945 holding one-third of the votes in each and supplying one-third of the financing of the bank, or $3 billion. At century's end, the United States still supplied one-fifth of all IMF funds, and these institutions and their policies continued to generate controversy. In September 2000, at World Bank–IMF meetings in Prague, the debts owed by Third World governments sparked riots as thousands of protesters, dissatisfied with the agencies' debt relief policies and the pace of economic globalization, threw Molotov cocktails and rocks at police and at such bastions of global capitalism as a McDonald's restaurant, cutting short the meetings.



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